Investors have been buying into the stock as the green technology and renewable energy drive has started to heat up. Hundreds of billions of pounds have flowed into renewable energy technologies over the past 24 months. And the trend is only accelerating.

A desire to build back better after the pandemic is pushing investors and consumers to rethink their energy habits. Rising hydrocarbon prices and supply issues are also driving changes. 

Green tech 

Enphase designs and manufactures software-driven home energy solutions. These primarily constitute solar energy solutions and home energy storage. The company is the world’s leading supplier of microinverter-based solar and battery systems. 

Put simply, this means the company’s technology allows consumers to generate solar energy and store it at home to be used later. Its latest product, which incorporates “IQ 7 microinverters“, can store 42 kWh of power. That’s enough to power most homes for more than a day. 

Demand for this renewable technology is growing. Enphase recorded revenues of $286m for 2017. By 2020, this figure hit $774m. For the quarter ending June 2021, revenues totalled $316m. That suggests the company is on track to generate $1.2bn of revenue over the next 12 months.

Of course, this could be a conservative figure with revenues growing in the double-digits on a year-on-year basis. 

The company is rapidly expanding its operations to meet global demand. The organisation is currently moving into Belgium, which it describes as the “fastest-growing solar market in Europe.” It also recently announced expansions into Italy and Brazil. 

Enphase share price valuation 

Enphase is already profitable, so it has the cash available to expand into these new markets. For the quarter to the end of June, it produced a net income of around $39m. Based on current Wall Street growth estimates, the stock’s trading at a forward price-to-earnings (P/E) multiple of 65. 

This multiple looks expensive, especially because competition is only going to grow in the solar market. Vast amounts of money are flowing into the renewable energy sector, and companies are constantly fighting for new business.

Enphase may be the leading the market today, but there’s no guarantee it’ll maintain its market position. There are also question marks over solar’s efficiency compared to other green technologies, such as wind and nuclear.

Despite these risks, I’m excited by the company’s success and its technology. As the world moves away from hydrocarbon energy, I think the demand for its solar products will continue to expand, especially among homeowners. That’s why I’d buy a speculative position for my portfolio today. Despite its recent performance, I don’t think it’s too late to buy the stock. 

Although my US shares are NASDAQ companies, they are also listed in the S&P 500, and because the S&P 500 is weighted based on market capitalisation, they have a heavy say on the index. It is generally thought of as the best index to value US stocks overall. If confidence is diminishing in the S&P 500, this could also spread to the index’s top companies such as Apple (NASDAQ: AAPL) and Tesla (NASDAQ: TSLA).

What is affecting the S&P 500?

As far I see it, there are two main factors causing uncertainty among US stock investors. The first is the rise in delta variant cases in the US. Infection rates are spreading by 20% week-over-week and Covid-related hospitalisations have risen 26.5% in America. As a result, this could negatively affect GDP.

The second factor follows the news that the Federal Reserve (Fed) revealed it could be reducing its monthly asset purchases this year. When this news was first revealed back in July, it caused a 2.3% decrease in the S&P 500. With the timing of Fed’s stimulus withdrawal coming closer, this might have other investors on red alert and could cause share prices to drop.

What I’m doing with my shares

Although the S&P 500 dropped to a low of 4,382 points this week and could follow this trajectory into next week, I’m not selling my positions any time soon. 

I own shares of Apple, Tesla, and Enphase Energy (NASDAQ: ENPH). None of them have had a great week in terms of their share price. 

Currently, the Apple share price has dropped by 1.5% in the last five days, reaching a low of $144.91. Apple is currently facing issues over an industry shortage of chips. The semiconductor industry was partly shut-down due to Covid-19 and is still playing catch-up. However, Apple’s recent quarterly results have been very impressive, with a 36% increase in revenue. 

The Enphase Energy share price sunk by almost 4% last week, to a price of around $166 as I’m writing. Enphase reported excellent financial results in its FY21 Q2 results with a 5% increase in revenue from Q1 to $316.1m. Enphase shares are expensive with a price-to-earnings ratio of 128.42.

The Tesla share price fell by just under 3% in the last five days. Tesla is currently facing a federal probe into its autopilot feature, with concerns over the safety of hands-free driving. This could explain the drop in price. However, the company’s financials are showing positive growth and strong revenue.

My outlook on the S&P 500 drop

For me, the important thing is to look at how a company is performing first, and then to analyse market trends as a secondary concern. It could be that these three shares will fall next week if the S&P 500 continues to drop, but this won’t dislodge my long-term dedication to these shares. Despite the drop, I’ve held these high-performing shares for a while and they are still green in my portfolio. I’ll be holding them for the foreseeable future.